What are credit enhancement schemes?

Credit enhancement schemes may take various forms. In the most basic scheme, a loan officer and home builders are taking measures to encourage borrowers to have their names added to the bank accounts of friends or family members temporarily to circumvent the underwriting process to show that they have sufficient deposits on hand. Additionally, some originators and homebuilders are depositing money into the accounts of loan applicants who are in the process of trying to qualify for a mortgage to be used as an asset. Once the underwriting process qualifies the loan and it closes, the builder withdraws the money and uses it for the next potential borrower. According to Fannie Mae, perpetrators are also filing amended tax returns and paying “back taxes” on unreported income for previous years to aid in the verification of income process for a new loan application.
(more…)

How to respond to credit fraud or identity theft

Experian® suggests that you follow a four-step process if you notice something unfamiliar or suspicious on one of your accounts or if someone accesses your bank account or commits any type of fraudulent activity using your identity.

Step 1: Contact Experian’s National Consumer Assistance Center to add an alert at any time of the day or night, visit its online Credit Fraud Center or Experian Fraud Division 1-888-397-3742; Equifax Fraud Division 1-800-525-6285; TransUnion Fraud Division 1-800-680-7289. An initial security alert can be immediately added to your credit file. This alerts creditors to confirm your identity before extending credit. Once an alert is added, your name will be removed from prescreened credit solicitation lists. Remember! An alert may prevent you from being approved for new credit or you may be asked to provide identity information.

You also may request a complimentary credit report.

The alert will be shared with the other national credit reporting companies, Equifax and TransUnion, so they can add the alert to their credit files.

Step 2: Review Complimentary Credit Report or Order Report.

Review your consumer disclosure for fraudulent data and call the special telephone number listed on the credit report.

You will speak with an Experian consumer assistance associate who is specially trained in fraud victim assistance.

Together, you and the consumer assistance associate identify fraudulent items. The items are investigated and verified.

Step 3: Experian Investigates and verifies the information that the consumer alleges as fraudulent with the creditors or data furnishers.

Upon receipt of a valid police report or valid state approved identity theft form, Experian blocks alleged fraudulent information from view by creditors and other users of the report. This allows you to continue to be credit-active without being penalized for any fraudulent information on your report.

Submit Police Report or Proof Documents

Experian employs special system procedures and matching criteria to ensure that fraudulent data is removed as soon as possible.

Step 4: Fraudulent Data Is Removed

Experian must complete an investigation within 30 days (or 45 days if information on an annual credit report is disputed).

The data contributor is asked to verify the information it reported with its records.

Once the response is received, the consumer will be notified.

Types of credit fraud

Credit fraud is a broad term for the use of a credit card (or any comparable type of credit) to buy goods or services with the intention of evading payment. Credit fraud includes:

Identity theft: the unauthorized use of personal identification information to commit credit fraud or other crimes

Just as there are various types of credit fraud, there also are different ways that credit thieves gather your personal information:

Using lost or stolen credit cards

Stealing from your mailbox

Looking over your shoulder during transactions

Going through your trash

Sending unsolicited email

Making false telephone solicitations

Looking at personnel records

Discovering Fraud

There are several warning signs that credit fraud may be occurring:

Your credit report contains inquiries or information about accounts that did not open

Strange charges show up on billing statements

Bills arrive from unknown or unfamiliar sources

You receive calls from creditors or collection agencies

What is credit fraud?

Should You Be Worried About Credit Card Fraud and Identity Theft?

According to credit fraud statistics, credit fraud and identity theft are a small part of overall credit card spending in the United States. Losses due to default far exceed those caused by fraud. However, if credit fraud or identity theft happens to you, it can be overwhelming. Victims may be protected financially, but they are forced to experience major inconvenience. Ultimately, we all pay for credit card fraud in terms of higher prices, higher interest rates and extra inconvenience.

How do I freeze and thaw my credit report?

Equifax: To request a freeze, Equifax wants you to send a certified letter with seven specific elements to Equifax Security Freeze/P.O. Box 105788/ Atlanta, Georgia 30348. The elements are spelled out clearly on the general information page, but they are, basically — name, address, date of birth, SSN, utility bill for proof of address, payment and a police report if you are a victim. Or you can go to: https://www.freeze.equifax.com/Freeze/jsp/SFF_PersonalIDInfo.jsp.

Experian: Before giving you the information you need, Experian will warn you that a security freeze may make your credit life very difficult. Take that with a grain of salt, and then pick your state. You’ll send the request by certified or overnight mail to Experian/ P.O. Box 9554/ Allen, TX 75013. You need to include your name, SSN, date of birth, current and past addresses dating back two years, a copy of your driver’s license, and one utility bill. Or you can go to: https://www.experian.com/fraud/center.html.

Freezes will cost usually $10 per bureau, depending on your state. Also, if you want to take out a new line of credit, you’ll have to pay to unfreeze your report, and then again to refreeze it. Credit report freezes are free for identity theft victims. For everyone else, it’s a preventative measure, that, considering the possible monetary and time cost of untangling identity theft, could be a wise investment.

Why are my scores different for the 3 credit bureaus?

In general, when people talk about “your score,” they’re talking about your FICO® score. But in fact, there are three different FICO scores developed by Fair Isaac – one for each of the three credit bureaus – Experian, TransUnion and Equifax. Fair Isaac makes the scores as consistent as possible between the three credit bureaus, but even if your information was exactly identical across all three, your scores might still slightly differ because the models for the three bureaus were developed separately. However, in this case, all three scores would be within a few points of each other.

While there will almost always be some minor differences in your scores across the three credit bureaus because of the slightly different models, significant score differences can result from the following situations:

Not all credit scores are “FICO” scores developed by Fair Isaac Corporation. So, make sure the scores you are comparing are actual FICO scores.

All of your credit information may not be reported to all three credit bureaus. The information on your credit report is supplied by lenders, collection agencies and court records. Don’t assume that each credit bureau has the same information pertaining to your credit history.

You may have applied for credit under different names (for example, Robert Jones versus Bob Jones) or a maiden name, which may cause fragmented or incomplete files at the credit reporting agencies. While, in most cases, the credit bureaus combine all files accurately under the same person, there are many instances where incomplete files or inaccurate data (social security numbers, addresses, etc.) cause one person’s information to appear on someone else’s credit report.

Lenders report credit information to the credit bureaus at different times, often resulting in one agency having more up-to-date information than another.

The credit bureaus may record the same information in different ways.

Thinking of closing accounts to raise your score?

FICO Tips – closing accounts

Closing old accounts might actually lower your FICO score.

Closing a revolving (credit card) account reduces the amount of credit you have available to you, which in turn can increase the percentage of credit you’re using – an increase in this percentage of credit being used can lower your score

Late payments and other account history won’t disappear from your credit report if you close the account.

Having available credit that you don’t use won’t lower your FICO score.

You may have reasons other than your FICO score to close old credit card accounts that you don’t use – but don’t do it just to get a better FICO score.

Why did my credit score go down?

I have excellent credit, yet my FICO® score went down. Why? There are various reasons why your FICO® score may have gone down:

Have you missed any payments? Late payments, collection accounts, settled accounts, repossessions, foreclosures, and public record items (tax liens, judgments, bankruptcies) can have a major negative impact on your FICO score. Even minor late payments, such as 30-day delinquencies, can negatively affect your score. Your payment history makes up the largest part of your FICO score, so the longer you pay your bills on time, the better your FICO score.

Are you comparing different scoring formulas? All scores offered by myFICO are true “FICO” scores developed by FICO (Fair Isaac Corporation). Other web sites offer a mix of different scores, many of them non-FICO scores developed by other companies. These non-FICO scores are typically used only for credit education purposes and are not actually used by lenders to make credit decisions. Over 80% of lenders use FICO scores as part of their lending decision, so make sure you are comparing FICO scores only with other FICO scores.

Have you looked at the “Negative Factors” on your myFICO report? These factors point out the areas most responsible for your score not being higher, and when compared with earlier reports, can help identify the causes for a drop in your FICO score.

Have you closed any credit card accounts, increased any credit card balances, or had any credit limits reduced? Any of these events can result in an increased proportion of credit card balances to available credit, which can lower your FICO score.

Have you applied for or opened any new accounts lately? Establishing a new credit account can be an indicator of increased risk and can reduce your FICO score.

How can I increase my FICO® credit score?

Increasing your FICO® score may take time and often there is no quick fix. FICO scores reflect credit payment patterns over time with more of an emphasis on recently reported information than older information. Below are some general tips to follow that may increase your FICO score:

Focus on the negative factors provided with your FICO score. These represent the main areas where your score could be higher.

Apply for and open new credit accounts only as needed. Don’t open accounts for the purpose of providing a better credit picture — it probably won’t raise your FICO score and, in some instances, may even lower your score.

Pay off your bills on time. Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO score.

If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your FICO score should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO score fades as time passes and as recent good payment patterns show up on your credit report. And good FICO scores weigh any credit problems against the positive information that says you’re managing your credit well.

If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This will not improve your FICO score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO score.

Pay off debt rather than move it around from one credit card to another. The most effective way to increase your FICO score in this area is by paying down your total revolving (credit card) debt.

If you have had problems in the past, re-establish your credit history by opening new accounts responsibly and paying them on time.

Manage credit cards responsibly by keeping balances well under the credit limit. In general, having credit cards and installment loans (and making timely payments) will raise your FICO score. People with no credit cards, for example, tend to be higher risk than people who have managed credit cards responsibly.

Do your rate shopping for a loan within a focused period of time. FICO scores distinguish between a search for a mortgage or auto loan, where it is customary to shop for the best rate, and a search for many new credit cards. •

Don’t close unused credit cards as a short-term strategy to raise your FICO score. This approach could backfire and actually lower your score.

Don’t open a number of new credit cards that you don’t need just to increase your available credit. This approach could also backfire and actually lower your score.

If you have been using credit for only a short time, don’t open a lot of new accounts too quickly, as rapid account build-up can look risky to a lender.

How do I correct errors on my credit report?

The three national credit bureaus – Equifax, TransUnion and Experian – collect and maintain the information in your credit reports. They each use that information and our scoring formula to calculate your FICO score. It is important to understand that:

The information in your credit report determines your FICO score

Only your creditors and the credit bureaus can make the changes needed to accurately reflect your credit history

To ensure that the mistake gets corrected as quickly as possible, contact both the credit bureau and organization that provided the information to the bureau. Both these parties are responsible for correcting inaccurate or incomplete information in your report under the Fair Credit Reporting Act.

First, tell the credit bureau in writing what information you believe is inaccurate. The credit bureau must investigate the item(s) in question – usually within 30 days – unless they consider your dispute frivolous. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should:

Clearly identify each item in your report you dispute.

State the facts and explain why you dispute the information.

Request deletion or correction.

You may want to enclose a copy of your report with the items in question circled. Your letter may look something like this sample. SAMPLE LETTER

Dear Sir or Madam: I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received. This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,

Your name

Enclosures: (List what you are enclosing)

Send your letter by certified mail, return receipt requested, so you can document that the credit bureau received your correspondence. Keep copies of your dispute letter and enclosures.

Second, write to the appropriate creditor or other information provider, explaining that you are disputing the information provided to the bureau. Again, include copies of documents that support your position. Many providers specify an address for disputes. If the provider again reports the same information to a bureau, it must include a notice of your dispute. Request that the provider copy you on correspondence they send to the bureau. Expect this process to take between 30 and 90 days.

In many states, you will be eligible to receive a free credit report, visit www.annualcreditreport.com. Once a dispute has been registered, in order to verify the updated information, contact the appropriate credit bureau to see if you qualify for this service.

How are credit report mistakes made and how do I dispute them?

When a credit report contains errors, it is often because the report is incomplete, or contains information about someone else. This typically happens because:

The person applied for credit under different names (Robert Jones, Bob Jones, etc.).

Someone made a clerical error in reading or entering name or address information from a hand-written application.

The person gave an inaccurate Social Security number, or the number was misread by the lender.

Loan or credit card payments were inadvertently applied to the wrong account.

Establishing credit is only the first step

Establishing a good credit history takes time. There are no shortcuts or tricks that can take you from no credit at all to a high score in a matter of months or even a few years. Your credit score is based on a number of factors such as payment history, length of time you’ve had credit, and much more. So, while it is important to initially establish credit, it is even more important to take the time to do the right things to maintain good credit.

Should I open a department store card?

Generally, store cards are a bad idea because they lure you in with that up-front discount, and then the ongoing interest rate is very high. Avoiding these cards is typically a good idea, but the ease in obtaining one may actually be a good thing if you’re having trouble establishing credit. If you have struck out at the local bank, you may want to consider checking with one of the local department stores and see what type of cards they offer. Whatever you do, make sure you find out whether or not they report to the credit bureaus. If they don’t, it will do you no good. If you are approved for their card, you need to be disciplined and use it properly. Don’t treat this new purchasing tool as free money, but only as a means to establish good credit. The limit will probably be low anyway, but you should make an initial purchase with it and subsequently pay the balance off in full. Once the card is active, it should begin to be reported to the credit bureaus. It is now important to maintain a good payment history on this card so your credit history can build upon it.

When All Else Fails If you’ve tried the bank, department store, or even credit card companies directly and failed, not all is lost. Secured credit is a last resort, but it is much easier to obtain than unsecured credit. When a credit card or loan is secured, it means that there is an asset linked to the account that the lender can take if you fail to make payments. When you have a mortgage or auto loan, these are secured loans. If you fail to make payments, the lender will take your house or car in order to satisfy the debt. You can establish the same thing at most banks with a secured credit card. You can pledge money you deposit in an account to secure the credit card. For example, you could obtain a secured credit card with a $500 limit if you put a $500 deposit in the bank that is linked to the card. If you fail to make your credit card payments, the bank takes your deposit. Again, you want to check and be sure that this secured credit is reported to the credit bureaus, but if so, this can be a useful tool to establish that first piece of credit history. After you maintain that account in good standing for a while, you may be able to obtain a regular credit card or loan.

For a list of banks who offer secured credit cards, please visit www.bankrate.com.

How do I establish credit?

There are a few things you can do that can help in your quest for establishing credit. The first thing you should do is open and maintain a checking and possibly even a savings account at a local bank. This is helpful in two ways:

When you have active bank accounts in good standing, you are proving that you can manage money. While bank accounts aren’t typically a part of your credit score, lenders can use this information to determine whether or not you are a credit risk.

Establishing a relationship with a bank will improve your chances in obtaining a loan or credit card through them. If you already do business with a bank, they should be the first place to look. They know you and they value your business. This existing relationship should carry some weight when seeking credit.

Why did a company pull my credit report?

First, determine if you have recently applied for a mortgage online or completed an application for an apartment. Mortgage companies and landlords will often access your credit through a company who provides credit reports for mortgage or tenant purposes. Multiple inquiries from the same company can happen when you are applying for credit. Here are a few examples:

At loan origination – In order to determine the best loan product, rates, etc. After a Rapid Rescore® – in order to show the new credit score after trade lines have been revised or corrected.

Prior to closing the loan – Debt not reflected on the credit report that you forgot to tell us about on your loan application is a leading cause of mortgage fraud. This is done to ensure no new liabilities have been incurred since loan origination which could alter your ability to repay this loan. If any additional liabilities or an increase in existing credit is revealed during the loan application process your loan may be subject to requalification.

Lender Preference – On occasion particular lenders require a credit report from a specific credit vendor in order to run your credit through their automated underwriting system. Although rare, it does happen and could be necessary to pull another credit report.

The possibility of additional credit reports is not limited to the above scenarios. An effort is made to access your credit as few times as possible during the loan process.

What is in my credit report?

Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information: Social Security number, date of birth, address, and employment information are used to identify you. These factors are not used in credit scoring. Updates to this information come from information you supply to lenders.

Identifying Information: These are your name, address, Social Security number, date of birth. These factors are not used in credit scoring. Updates to this information come from information you supply to lenders.

Trade Lines: These are your credit accounts. Lenders report on each account you have established with them. They report the type of account (bankcard, auto loan, mortgage, etc.), the date you opened the account, your credit limit or loan amount, the account balance and your payment history.

Credit Inquiries: When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report within the last two years. The report you see lists both “voluntary” inquiries, spurred by your own requests for credit, and “involuntary” inquires, such as when lenders order your report so as to make you a pre-approved credit offer in the mail.

Public Record and Collection Items: Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens and judgments.

Credit Plus called me. What should I do?

If you are trying to secure a loan and we left a message requesting a callback or conference call, please contact a Credit Plus Customer Service Representative at 800.258.3488.

Can Credit Plus help me understand why I was denied credit?

Unfortunately, only your lender can provide that information to you. Therefore, to get your questions answered, you should contact your lending institution directly.

Is it possible to dispute my credit score?

Credit scores are issued by the Fair Isaac Corporation (FICO) and are calculated from data that is on your credit report, including payment history, types of credit used, types of inquiries, amounts owed, length of credit history, new credit and public record information. Even though you can’t dispute your credit score, you are allowed to dispute any incorrect or incomplete information that exists on your credit report. Please visit www.myfico.com for more information about credit scores.

How can I dispute incomplete or incorrect information that appears on my Credit Plus credit report?

If one of our lender clients requested a copy of your credit report from us and there is incorrect or incomplete information on it, you can dispute it by contacting us via phone (877.224.8107).

How do I receive a copy of my credit report?

If one of our clients requested your credit report from Credit Plus and you would like a copy of it, please contact us by email consumerdisputes@creditplus.com or phone (877.224.8107). You can directly obtain the most current version of your credit report at www.annualcreditreport.com.

How can I manage my credit inquiries?

In addition to protecting yourself from identity theft, having fewer hard inquiries on your credit report may help you be considered a more attractive mortgage or large loan applicant. Here are several steps you can take to better manage the impact of hard inquiries on your credit score:

Pay your bills on time and minimize your debt as much as possible.

If you intend to apply for a large loan, limit the number of times you ask for credit in the surrounding months.

Be sure the hard inquiries that appear on your report are authorized and accurate by checking your own credit reports.

Can hard inquiries be disputed?

Accurate hard inquiries are generally not removed from credit reports, but if a business pulled your credit without your permission or by mistake, you can ask the credit bureau to remove the inquiry from your file. If you haven’t applied for a new loan but a hard inquiry appears on your credit score, it could mean that someone is using your personal information. To protect yourself from identity theft, you should monitor your credit report and the number of inquiries you have.

How much does a hard inquiry lower my credit score?

Generally, it is a good idea to limit the number of hard inquiries on your report overall. That said, the number of hard pulls on your credit reports plays a small role in calculating your credit scores. The FICO® Score considers your payment history, amounts owed, length of credit history, different types of credit you have and new credit when calculating your score. Inquiries fall into the “new credit” category but they are not nearly as important as making payments on time and having limited debt.

What’s the impact of hard inquiries when you are shopping for a loan?

When shopping for a mortgage or auto loan, multiple inquiries happen within a specific period of time— usually around 14 days—and they are counted as one inquiry. However other times, when multiple inquiries are recorded on your report, lenders might consider your repeated requests as a sign of risk. Multiple pulls in a short period of time might indicate you are having financial problems, and lenders need to be sure you are not over-extended before they extend any new debt to you.

According to FICO®, people with six or more inquiries on their report can be up to eight times more likely to declare bankruptcy than someone with no inquiries.

Helpful Links and Resources

Opt-out of solicitations: The FCRA provides you with the right to "Opt Out," which prevents Consumer Credit Reporting companies from providing your credit file information to companies that offer Firm Offers of Credit

Opt-out of Lexis Nexis: Individuals may request to opt-out of having personal information about themselves made available through certain LexisNexis products and services, in accordance with legal requirements or if permitted by LexisNexis policy. http://www.lexisnexis.com/privacy/for-consumers/

Consumer Financial Protection Bureau: The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans – whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products. At this site, you may file a complaint or simply find valuable topics such as how to get assistance with paying your mortgage.